Bell System

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The Bell System logo and trademark, designed by Saul Bass in 1969 Bell System hires 1969 logo blue.svg
The Bell System logo and trademark, designed by Saul Bass in 1969

The Bell System was the system of companies, led by the Bell Telephone Company and later by AT&T, which dominated the telephone services industry in North America for 100 years from its creation in 1877 until its demise in the early 1980s. The system of companies was often colloquially called Ma Bell (as in "Mother Bell"), as it held a near-complete monopoly over telephone service in most areas of the United States and Canada. At the time of its breakup in the early 1980s, the Bell System had assets of $150 billion (equivalent to $360 billion in 2018) and employed over one million people.

Bell Telephone Company

The Bell Telephone Company, a common law joint stock company, was organized in Boston, Massachusetts on July 9, 1877, by Alexander Graham Bell's father-in-law Gardiner Greene Hubbard, who also helped organize a sister company — the New England Telephone and Telegraph Company. The Bell Telephone Company was started on the basis of holding "potentially valuable patents", principally Bell's master telephone patent #174465.

AT&T Corporation Subsidiary of AT&T that provides voice, video, data, and Internet telecommunications

AT&T Corporation, originally the American Telephone and Telegraph Company, is the subsidiary of AT&T Inc. that provides voice, video, data, and Internet telecommunications and professional services to businesses, consumers, and government agencies.

Contents

In the early 1970s, American antitrust regulators suspected that Bell was abusing its monopoly power, and in 1974 the Antitrust Division of the U.S. Department of Justice brought a lawsuit against Bell claiming violations of the Sherman Act. In 1982, feeling that it could not win, Bell agreed to a Justice Department-mandated consent decree that settled the lawsuit and ordered it to break itself up into seven "Regional Bell Operating Companies" (known as "Baby Bells"), which it did in 1984, ending the original company's existence. These "Baby Bells" are now independent companies, and several of them are very large corporations in their own right, such as AT&T, Verizon Communications, and CenturyLink.

The United States Department of Justice Antitrust Division is a law enforcement agency that enforces the U.S. antitrust laws. It has exclusive jurisdiction over American criminal antitrust prosecutions, and shares jurisdiction with the Federal Trade Commission (FTC) over civil antitrust cases. The Antitrust Division often works jointly with the FTC to provide regulatory guidance to businesses.

A consent decree is an agreement or settlement that resolves a dispute between two parties without admission of guilt or liability, and most often refers to such a type of settlement in the United States. The plaintiff and the defendant ask the court to enter into their agreement, and the court maintains supervision over the implementation of the decree in monetary exchanges or restructured interactions between parties. It is similar to and sometimes referred to as an antitrust decree, stipulated judgment, or consent judgment. Consent decrees are frequently used by federal courts to ensure that businesses and industries adhere to regulatory laws in areas such as antitrust law, employment discrimination, and environmental regulation.

Verizon Communications American communications company

Verizon Communications Inc. is an American multinational telecommunications conglomerate and a corporate component of the Dow Jones Industrial Average. The company is based at 1095 Avenue of the Americas in Midtown Manhattan, New York City, but is incorporated in Delaware.

History

Logo used from 1889 to 1900 Bell System hires 1889 logo.PNG
Logo used from 1889 to 1900

In 1877, the American Bell Telephone Company, named after Alexander Graham Bell, opened the first telephone exchange in New Haven, Connecticut. Within a few years local exchange companies were established in every major city in the United States. Use of the Bell System name initially referred to those early telephone franchises and eventually comprised all telephone companies owned by American Telephone & Telegraph, referred to internally as associated companies, regional holding companies, or later Bell operating companies (BOCs).

Alexander Graham Bell scientist and inventor known for his work on the telephone

Alexander Graham Bell was a Scottish-born American inventor, scientist, and engineer who is credited with inventing and patenting the first practical telephone. He also co-founded the American Telephone and Telegraph Company (AT&T) in 1885.

New Haven, Connecticut City in Connecticut, United States

New Haven is a coastal city in the U.S. state of Connecticut. It is located on New Haven Harbor on the northern shore of Long Island Sound in New Haven County, Connecticut, and is part of the New York metropolitan area. With a population of 129,779 as determined by the 2010 United States Census, it is the second-largest city in Connecticut after Bridgeport. New Haven is the principal municipality of Greater New Haven, which had a total population of 862,477 in 2010.

Telephone exchange telecommunications system used in public switched telephone networks or in large enterprises

A telephone exchange or telephone switch is a telecommunications system used in the public switched telephone network or in large enterprises. It interconnects telephone subscriber lines or virtual circuits of digital systems to establish telephone calls between subscribers.

In 1899, American Telephone & Telegraph (AT&T) acquired the assets of its parent, the American Bell Telephone Company. American Bell had created AT&T to provide long-distance calls between New York and Chicago and beyond. AT&T became the parent of American Bell Telephone Company, and thus the head of the Bell System, because regulatory and tax rules were leaner in New York than in Boston, where American Bell was headquartered. Later, the Bell System and its moniker "Ma Bell" became a term that referred generally to all AT&T companies of which there were four major divisions:

Bell Labs Research and scientific development company

Nokia Bell Labs is an industrial research and scientific development company owned by Finnish company Nokia. With headquarters located in Murray Hill, New Jersey, the company operates several laboratories in the United States and around the world. Bell Labs has its origins in the complex past of the Bell System.

Regional Bell Operating Company U.S. regional telephone companies created by 1984 AT&T breakup

The Regional Bell Operating Companies (RBOC) are the result of United States v. AT&T, the U.S. Department of Justice antitrust suit against the former American Telephone & Telegraph Company. On January 8, 1982, AT&T Corp. settled the suit and agreed to divest its local exchange service operating companies. Effective January 1, 1984, AT&T Corp.'s local operations were split into seven independent Regional Bell Operating Companies known as Baby Bells.

In 1913, the federal government challenged the Bell System's growing monopoly over the phone system under AT&T ownership in an anti-trust suit, leading to the Kingsbury Commitment. Under the commitment, AT&T escaped break-up or nationalization in exchange for divesting itself of Western Union and allowing non-competing independent telephone companies to interconnect with its long-distance network. After 1934, the Federal Communications Commission (FCC) assumed regulation of AT&T. Proliferation of telephone service allowed the company to become the largest corporation in the world until its dismantling by the United States Department of Justice in 1984, at which time the Bell System ceased to exist. [1]

Monopoly Market structure with a single firm dominating the market

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market. Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit. The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry.

The Kingsbury Commitment of 1913 was an out-of-court settlement of the government's antitrust challenge of AT&T's growing vertical monopoly over the phone industry. In return for the government's agreement not to pursue its case against AT&T as a monopolist, AT&T agreed to divest the controlling interest it had acquired in the Western Union telegraph company, and to allow non-competing independent telephone companies to interconnect with the AT&T long distance network.

The Western Union Company is an American worldwide financial services and communications company. Its headquarters is in Denver, Colorado. Up until it discontinued the service in 2006, Western Union was globally the best-known American company in the business of exchanging telegrams.

Formation under Bell patent

1912 Bell System advertisement promoting its slogan for universal service Bell System advertisement in Western Electric v1no1 News March 1912 promoting universal service.jpg
1912 Bell System advertisement promoting its slogan for universal service

Receiving a U.S. patent for the invention of the telephone on March 7, 1876, Alexander Graham Bell formed the Bell Telephone Company in 1877, which in 1885 became AT&T. [2] [3] [4]

Patent Intellectual property conferring a monopoly on a new invention

A patent is a form of intellectual property that gives its owner the legal right to exclude others from making, using, selling and importing an invention for a limited period of years, in exchange for publishing an enabling public disclosure of the invention. In most countries patent rights fall under civil law and the patent holder needs to sue someone infringing the patent in order to enforce his or her rights. In some industries patents are an essential form of competitive advantage; in others they are irrelevant.

When Bell's original patent expired 15 years later in 1894, the telephone market opened to competition and 6,000 new telephone companies started while the Bell Telephone company took a significant financial downturn. [2] [4]

On April 30, 1907, Theodore Newton Vail returned as President of AT&T. [2] [4] Vail believed in the superiority of one national telephone system and AT&T adopted the slogan One Policy, One System, Universal Service. [2] [5] This became the company's philosophy for the next 70 years. [4] Under Vail, AT&T began acquiring many of the smaller telephone companies including Western Union telegraph. [2] [4] Anxious to avoid action from government antitrust suits, AT&T entered in 1913 into an out-of-court agreement known as the Kingsbury Commitment with the federal government. [2] [5]

Kingsbury Commitment

Following a government antitrust suit in 1913, AT&T agreed to the Kingsbury Commitment in which AT&T would sell its $30 million in Western Union capital stock, allow competitors to interconnect with its system, and not acquire other independent companies without permission from the Interstate Commerce Commission. [2] [4] [6]

Logo style of Bell System affiliated companies from 1921 to 1939 Bell System hires 1921 logo.PNG
Logo style of Bell System affiliated companies from 1921 to 1939
195 Broadway, AT&T headquarters for most of the 20th century 195 Broadway revolving door jeh.jpg
195 Broadway, AT&T headquarters for most of the 20th century
The Spirit of Communication as used on the Bell System's directories in the 1930s-40s Spirit of Communication AT&T logo 1914.jpg
The Spirit of Communication as used on the Bell System's directories in the 1930s–40s

Nationwide monopoly

The Bell trademark pictured here was used from 1921 through 1939 by both the AT&T corporation and the regional operating corporations to co-brand themselves under a single Bell System trademark. For each regional operating company, its name was placed where "name of associated company" appears in this template version of the trademark.

Bell system telephones and related equipment were made by Western Electric, a wholly owned subsidiary of AT&T Co. Member telephone companies paid a fixed fraction of their revenues as a license fee to Bell Labs.

As a result of this vertical monopoly, the Bell System effectively owned most telephone service in the United States by 1940, from local and long-distance service to the telephones. This allowed Bell to prohibit its customers from connecting equipment not made or sold by Bell to the system without paying fees. For example, if a customer desired a style of telephone not leased by the local Bell company, he or she had to purchase the instrument at cost, furnish it to the telephone company for rewiring, pay a service charge, and a monthly lease fee for using it.

In 1949, the United States Department of Justice alleged in an antitrust lawsuit that AT&T and the Bell System operating companies were using their near-monopoly in telecommunications to attempt to establish unfair advantage in related technologies. The outcome was a 1956 consent decree limiting AT&T to 85% of the United States' national telephone network and certain government contracts, and from continuing to hold interests in Canada and the Caribbean. The Bell System's Canadian operations included the Bell Canada regional operating company and the Northern Electric manufacturing subsidiary of the Bell System's Western Electric equipment manufacturer. Western Electric divested Northern Electric in 1956, but AT&T did not divest itself of Bell Canada until 1975. ITT Corporation, then known as International Telephone & Telegraph Co., purchased the Bell System's Caribbean regional operating companies.

The Bell System also owned various Caribbean regional operating companies, as well as 54% of Japan's NEC and a post-World War II reconstruction relationship with Nippon Telegraph and Telephone (NTT) before the 1956 boundaries were emplaced. Before 1956, the Bell System's reach was truly gargantuan. Even during the period from 1956 to 1984, the Bell System's dominant reach into all forms of communications was pervasive within the United States and influential in telecommunication standardization throughout the industrialized world.

The 1984 Bell System divestiture brought an end to the affiliation branded as the Bell System. It resulted from another antitrust lawsuit filed by the U.S. Department of Justice in 1974, alleging illegal practices by the Bell System companies to stifle competition in the telecommunications industry. The parties settled the suit on January 8, 1982, superseding the former restrictions that AT&T and the DOJ had agreed upon in 1956.

Present-day usage of the Bell name

The Bell System service marks, including the circled-bell logo, especially as redesigned by Saul Bass in 1969, and the words Bell System in text, were used before January 1, 1984, when the AT&T divestiture of its regional operating companies took effect. Currently, the word mark Bell, the logo, and other related trademarks, are held by each of the remaining Bell companies, namely AT&T, Verizon, CenturyLink, and Cincinnati Bell. [7] International rights to the marks, except for Canada, are held by a joint venture of these companies, Bell IP Holdings.

A Verizon payphone with the Bell logo VerizonBell.jpg
A Verizon payphone with the Bell logo

Of the various resulting 1984 spinoffs, only BellSouth actively used and promoted the Bell name and logo during its entire history, from the 1984 break-up to its merger with the new AT&T in 2006. Similarly, cessation of using either the Bell name or logo occurred for many of the other companies more than a decade after the 1984 break-up as part of an acquisition-related rebranding. The others have only used the marks on rare occasions to maintain their trademark rights, even less now that they have adopted names conceived long after divestiture. Examples include Verizon, which still used the Bell logo on its trucks and payphones until it updated its own logo in 2015, and Qwest, formerly US West, which licenses the Northwestern Bell and Mountain Bell names to Unical Enterprises, who makes telephones under the Northwestern Bell name.

Cincinnati Bell, a local franchise of the Bell System that was never wholly owned by AT&T and existed separately prior to 1984, also continues to use the Bell name. It stopped using the Bell logo in the summer of 2006, though it is still seen on some bills, vehicles, and other literature.[ citation needed ]

In 1984, each regional Bell operating company was assigned a set list of names it was allowed to use in combination with the Bell marks. Aside from Cincinnati Bell, all these Bell System names have disappeared from the United States business landscape. Southwestern Bell used both the Bell name and the circled-bell trademark until SBC opted for all of its companies to do business under the "SBC" name in 2002. Bell Atlantic used the Bell name and circled-bell trademark until renaming itself Verizon in 2000. Pacific Bell continued operating in California under that name (or the shortened "PacBell" nickname) until SBC purchased it.

In Canada, Bell Canada (divested from AT&T in 1975) continues to use the Bell name. For the decades that Nortel was named Northern Telecom, its research and development arm was Bell Northern Research. Bell Canada and its holding-company parent, Bell Canada Enterprises, still use the Bell name and used variations of the circled-bell logo until 1977, which until 1976 strongly resembled the 1921 to 1939 Bell System trademark shown above.

Subsidiaries

Pre-1956 international holdings

Before the 1956 break-up, the Bell System included the companies listed below, plus those listed in the pre-1984 section. Northern Electric, and the Caribbean regional operating companies were considered part of the Bell System proper before the 1956 break-up. Nippon Electric was considered a more distant affiliate of Western Electric than Northern Electric, where Nippon Electric via its own research and development adapted the designs of Western Electric's North American telecommunications equipment for use in Japan, which to this day gives much of Japan's telephone equipment and network a closer resemblance to North American ANSI and Telcordia standards than to European-originated ITU-T standards. Before the 1956 break-up, Northern Electric was predominantly focused only on manufacturing, without any significant amount of telecommunication-equipment research & development of its own. The post-World War II-occupation operation of Japan's NTT was considered an administrative adjunct to the North American Bell System.

Manhole cover with Bell System logo Bell Systems manhole hayward.jpg
Manhole cover with Bell System logo

Pre-1984 breakup

Immediately before the 1984 break-up, the Bell System had the following corporate structure:

1984

On January 1, 1984, the former components of the Bell System were structured into the following Regional Bell Operating Companies (RBOCs), which became known as Baby Bells.

Today

After 1984, multiple mergers occurred of the operating companies and between them, so that some components of the former Bell System are now owned by companies independent of the historic Bell System, including foreign telecommunications firms. The structure of the companies today[ when? ] is as follows.

Remaining "Regional Bell Operating Companies"
Other "Bell Operating Companies"
Cincinnati Bell's alternative logo retained the iconic Bell logo until 2016. CincinnatiBell (vectorized).svg
Cincinnati Bell's alternative logo retained the iconic Bell logo until 2016.

The following telephone companies are considered independent of the Baby Bells:

Other "Bell System" companies

The following companies were divested after 1984 from AT&T Corp. or the Baby Bells and do not provide telephone service.

Beginning in 1991, the Baby Bells began to consolidate operations or rename their Bell Operating Companies according to the parent company name, such as "Bell Atlantic – Delaware, Inc." or "U S WEST Communications, Inc.", to unify their corporate images.

See also

Related Research Articles

GTE former American telecommunications company

GTE Corporation, formerly General Telephone & Electronics Corporation (1955–1982), was the largest independent telephone company in the United States during the days of the Bell System. The company operated from 1926, with roots tracing further back than that, until 2000, when it was acquired by Bell Atlantic; the combined company took the name Verizon.

The Western Electric Company was an American electrical engineering and manufacturing company that was officially founded in 1869 and served as the primary supplier and purchasing agent to the Bell System and AT&T from 1881 to 1996. The company was responsible for many technological innovations and seminal developments in industrial management.

The New England Telephone and Telegraph Company was a very early company set up to develop the then-new telephone.

Pacific Telesis Group was one of the seven Regional Bell Operating Companies, sometimes also referred to as "RBOCs" or "Baby Bells", created in 1983 in preparation of the breakup of AT&T as a holding company for Pacific Bell and Nevada Bell, Pacific Telesis International and several other non-regulated companies including PacTel Mobile Services and PacTel InfoSystems. It was acquired by SBC Communications in 1997.

Breakup of the Bell System

The breakup of the Bell System was mandated on January 8, 1982, by an agreed consent decree providing that AT&T Corporation would, as had been initially proposed by AT&T, relinquish control of the Bell Operating Companies that had provided local telephone service in the United States and Canada up until that point. This effectively took the monopoly that was the Bell System and split it into entirely separate companies that would continue to provide telephone service. AT&T would continue to be a provider of long distance service, while the now-independent Regional Bell Operating Companies (RBOCs) would provide local service, and would no longer be directly supplied with equipment from AT&T subsidiary Western Electric.

The New York Telephone Company (NYTel) was organized in 1896, taking over the New York City operations of the American Bell Telephone Company.

VTech Innovation, L.P., doing business as Advanced American Telephones, is a telephone manufacturing company.

Verizon New England, Inc., which was formerly New England Telephone and Telegraph Company, more commonly known as New England Telephone, is a Bell Operating Company that serves most of Massachusetts and all of Rhode Island.

Verizon New Jersey

Verizon New Jersey, Inc., formerly New Jersey Bell Telephone Company, is the Bell Operating Company serving the U.S. state of New Jersey. In 1984, the Bell System Divestiture split New Jersey Bell off into a Regional Bell Operating Company, along with the 21 other BOCs AT&T had a majority stake in. On January 1, 1984, New Jersey Bell became part of Bell Atlantic.

The Chesapeake and Potomac Telephone Company, usually known as C&P Telephone, is a former d/b/a name for four Bell Operating Companies providing service to Washington, D.C., Maryland, West Virginia, and Virginia.

AT&T Technologies, Inc., was created by AT&T in 1983 in preparation for the breakup of the Bell System, which became effective as of January 1, 1984. It assumed the corporate charter of Western Electric Co., Inc.

Alcatel-Lucent French global telecommunications equipment company (2006-2016)

Alcatel-Lucent S.A. was a French global telecommunications equipment company, headquartered in Boulogne-Billancourt, France. It was formed in 2006 by the merger of France-based Alcatel and U.S.-based Lucent, the latter being the successor of AT&T's Western Electric.

AT&T refers to several related companies providing telecommunications services:

Verizon Maryland was founded in 1884 as The Chesapeake and Potomac Telephone Company of Baltimore City. It changed its name to The Chesapeake and Potomac Telephone Company of Maryland on January 3, 1956, and the corporate name at this point changed to C&P Telephone of Maryland.

Frontier West Virginia, Inc. is one of the original Bell Operating Companies and provides local telephone service in the U.S. state of West Virginia.

Bell System Practices

The Bell System Practices (BSPs) is a compilation of technical publications which describes the best methods of engineering, constructing, installing, and maintaining the telephone plant of the Bell System under direction of AT&T and Bell Telephone Laboratories. Covering everything from accounting and human resources procedures through complete technical descriptions of every product serviced by the Bell System, it includes a level of detail specific to the best way to wrap a wire around a screw, for example.

Verizon Virginia is an American telecommunications company, that was founded as the Chesapeake and Potomac Telephone Company of Virginia in 1903.

The Chesapeake and Potomac Telephone Company was founded in June 1883. C&P Telephone Co. provided telephone service to Washington, D.C.

References

  1. "AT&T History: The Bell System". AT&T Corporation. Archived from the original on September 6, 2008. Retrieved 2008-12-22.
  2. 1 2 3 4 5 6 7 "Unnatural Monopoly: Critical Moments". Cato Institute. Archived from the original on 10 September 2008. Retrieved 2008-09-17.
  3. "Bell's Telephone". Franklin Institute. Archived from the original on 12 September 2008. Retrieved 2008-09-17.
  4. 1 2 3 4 5 6 "AT&T Milestones in AT&T History". AT&T. Archived from the original on 28 September 2008. Retrieved 2008-09-17.
  5. 1 2 "AT&T History: The Bell System". AT&T. Archived from the original on 3 October 2008. Retrieved 2008-09-17.
  6. Brooks, John. Telephone: The First Hundred Years, Harper & Row, 1976, ISBN   978-0-06-010540-2.
  7. USPTO record for trademark serial no. 73727728 (example "Bell" registration originally held by Pacific Telesis): "Registration is nationwide, but is subject to the condition that registrant shall use the mark only in conjunction with one or more of the following modifiers; "Nevada Bell", "Pacific Bell", "Pacific Telephone", "Pacific Telesis", or "PacTel". Use of a modifier shall be considered to be in conjunction with the mark if it is used in sufficient proximity to the mark such that a reasonable observer would normally view the mark and the modifier in a single visual impression and would recognize that both the mark and the modifier are used by registrant. Registrant's right to exclusive use of the mark is subject to the rights of the [other RBOCs], to which concurrent registrations in the mark have also been issued, to use the mark in conjunction with one or more of the modifiers specified in those registrations[...]"